Africa: Is Aid an Answer?
Elizabeth Caucutt and
Krishna Kumar ()
The B.E. Journal of Macroeconomics, 2008, vol. 8, issue 1, 48
Abstract:
We address the poverty trap rationale for aid to Africa. We calibrate models that embody typical explanations for stagnation: coordination failures, ineffective mix of occupational choices and imperfect capital markets, and insufficient human capital accumulation coupled with high fertility. Calibration is ideally suited for this evaluation given the paucity of high-quality data, the high degree of model nonlinearity, and the need for conducting counterfactual policy experiments. We find that calibrations that yield multiple equilibria -- one being prosperity and the other stagnation -- are not particularly robust in capturing the African situation. This tempers optimism about foreign aid typically prescribed based on models of multiplicity. Moreover, conditional on multiplicity, the calibrated models indicate that the cost of policy interventions needed to trigger development in stagnant economies is small. The lack of reforms in Africa, despite the low estimated costs, suggests political hurdles to reform. It is not clear that foreign aid would be able to circumvent these. Taken together, we conclude that the case for foreign aid to Africa is weak.
Keywords: coordination failure; occupational choice; human capital (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)
Downloads: (external link)
https://doi.org/10.2202/1935-1690.1761 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejmac:v:8:y:2008:i:1:n:32
Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejm/html
DOI: 10.2202/1935-1690.1761
Access Statistics for this article
The B.E. Journal of Macroeconomics is currently edited by Arpad Abraham and Tiago Cavalcanti
More articles in The B.E. Journal of Macroeconomics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().